Friday, May 17, 2013

Christie's And Social Mood

Recently a record-setting auction at Christie's in New York made it sound as though the art world is booming.

Since 2009, it is. But dig a little deeper and you'll find this record-setting auction is just another indication of mixed social mood.

Christie’s sets global record with $495m contemporary art sale

~Bloomberg

According to the Mei Moses Fine Art Index using data through March 2013, the world wide auction market was down 5.8% for the first quarter "as art continued to underperform equities since mid 2012."

Impressive headlines powerfully stimulate the herding instinct, just as "good news" recently enticed investors to bid up the Dow Jones Industrial Average to all-time highs at 15,542.40 only to reverse an equally impressive 276.44 points the same day.

Because art is just another expression of social mood and is subject to the same extremes of emotion, one should not be surprised if even the biggest auction in history fails to reverse the current down trend in the art market. This is where knowledge of the Elliott Wave Principle can aid one's analysis immensely.

With the stock market is currently in a "wave b" rally, the section on wave personality in Elliott Wave Principle ( text p.81) is important to review. It describes B waves as "sucker plays." More succinctly, they are phonies.

Sounds a lot like a record-setting auction that still manages to fall short of the mark. Incredibly, the auctioneer's chairman described the evening this way:

“The remarkable bidding and record prices set reflect a new era in the art market, wherein seasoned collectors and new bidders compete at the highest level within a global market.”

Notice he said that record prices "reflect a new era in the art market." Socionomically, record prices merely reflect a new extreme in social mood, not a new era. Forewarned with an understanding of wave personality, however, the disconnect is immediately apparent.

A Bloomberg Television reporter who attended the auction said:

"It was really unbelievable. It was like the auction was on fire. It was lot after lot going over their high estimates one auction record after another..."

As EWP would say: a "speculator's paradise."

When asked if the prices could be sustained, she answered:

"The last auction which came close in the tally was in 2006, which was a very high moment for the art market . . . it seems like the top tier of the contemporary art market is just going strong and that there is enough wealth in the world, and there are enough people who can afford those pieces which they perceive as a once in lifetime opportunity."

It just may be a once in a lifetime opportunity: to pay top price.

Social mood is fickle and can change in an instant. A few nights later, also in New York, a "muted" auction took place where Andy Warhol's "Four Marilyns" was auctioned for a Fibonacci $38.2 million, 46% less than when it sold for $71.7 million in 2007.

Another interesting quote described the record-setting Christie's auction:

“No one knows if we have reached a peak or if these prices are just going to keep going higher. They were quite astounding, really eye-popping numbers,” said Dorsey Waxter, president of the Art Dealers Association of America, who attended the record-setting sale. “There were works on paper that were considered just as valuable as those on canvas, which has never been the case,” she added.

This is classic "flight from quality" that EWI has noted before. This is no different than hedge funds buying up real estate in Phoenix, no different than bond funds rewriting their charters in order to purchase stocks. This misguided value perception will flip when social mood turns negative and the dash for cash begins. "Priceless" works of art will be sold for whatever cash they can muster before they truly do become priceless.

Here is how the April art market insight from Mei Moses sums it up:

WEAKNESS CONTINUES IN THE WORLD WIDE ART AUCTION MARKET AS U.S. EQUITIES OBTAIN ALL TIME HIGHS. THE WORLD WIDE AUCTION ART MARKET CONTINUED TO RESPOND TO GLOBAL ECONOMIC AND POLITICAL UNCERTAINTY DIFFERENTLY THAN EQUITIES.

One of these markets is a phony. Both are suggestive of mixed social mood.

A recent New York Times arts article had this to say about the current juncture:

"The idea that everyone can have everything may be logically preposterous, but it is ideologically essential to the imagination of a country that seems to be living simultaneously in the Great Depression and the Gilded Age."

"Smart, clear, level headed thinking . . . It calms me to read an unbiased assessment of this market by the numbers."

"Great job and key insight here! Thx!"

"Still check your blog just about every day, great reading. Love It!!!!!!"

"You were born for writing and trading. I love your blog."

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